March 13, 2014

"Where some people are very wealthy and others have nothing, the result will be either extreme democracy or absolute oligarchy, or despotism will come from either of those excesses." ~ Aristotle

If you don't have money, it's because you don't have money. A philosopher might call this circular reasoning; but it's scientific fact in the financial world, especially in the past five years.

According to the Federal Reserve, household wealth in the US is at a new record high of $80 trillion, most of which consists of stocks and home equity. Therefore the wealth that evaporated during and immediately following the Great Recession of 2007 to 2009 has been restored, at least in total.

In different words, those fortunates who still had equity of some kind five years ago (and haven't tapped into it since then) have a much higher net worth now than they did prior to 2009. In fact, equity levels in stocks and real estate have grown so much that even the vast number of people not participating in the economic recovery are no longer impacting the national totals negatively. The few pluses are so high that they outweigh the many negatives.

But who is participating in this record wealth?

One could label this financial phenomenon as an example of the "rich getting richer." This is not a moralistic statement but a simple observation of fact. Sure, there are certainly some examples of new wealth being created, but the record high for US household wealth, in total, is primarily a result of extreme growth for a minority and small to negative growth for the majority.

For example, as I write this, the bull market for stocks has turned 5 years old. If you had invested $100,000 in an S&P 500 Index Fund on March 9, 2009, your investment would now be worth over $340,000, assuming 5 years compounding interest at an annualized rate of 25% per year. This is outstanding and nearly unprecedented growth for stocks. But how many people had extra cash sitting around, or the capacity to pump money into their 401(k) plans, 5 years ago?

"The life of money-making is one undertaken under compulsion since wealth is not the good we are seeking and is merely useful for the sake of something else." ~ Aristotle, Nichomachean Ethics.

So it takes money to make money. This, of course, does not include the acquisition of money by means of earning it through a trade: making money is not the same as earning it.

A pure capitalist would disagree with Aristotle, when he says that money should not be used for the purpose of making more money. He would say that the best use of money is for the purpose of the exchange of goods and services but that the use of money for the sole purpose of making more money (i.e. investing and lending) is unnatural and can lead to the degradation of an individual’s character by making them desirous to continue accumulating money, furthermore causing the passions to blindly dominate their reason.

Similarly, the lack of money, especially in a capitalist society, can lead one to falsely beleive they are "behind" or that they are "less than" because they have not participated directly in the economic expansion of a nation. But where is the lesson here? Is there something wrong with making more money with the money you already have, while others are not?

My philosophical observation for this post is that money is not the root of all evil but rather the easiest way to lose oneself. Aristotle may not have been making a prediction about the potential negative outcome of using money for the sole purpose of making more money but he was correct: Financial wealth is not really "the good we are seeking" but it is rather a tool or a means to an end; and that end is to be free enough to be ourselves. But ironically it is difficult to "be yourself" when your first concern is with your money (or lack thereof).

More importantly, neither money nor life are zero sum games. If a billionaire is happy, it doesn't mean that a person with a negative net worth cannot be happy.

March 28, 2013

"Paradoxically, what keeps the so-called
consumer society going is the fact that trying to find yourself through things
doesn’t work: The ego satisfaction is
short-lived and so you keep looking for more, keep buying, keep consuming." ~
Eckhart Tolle

There was a time in history when humans only consumed what they needed
to survive and reproduce. However, humans have "evolved" to mindlessly consume much
more than is needed. In nature, at least as it is explained by humans (science), living things can be either a producer (makes its own food), consumer (gets food from other living things), or a decomposer (breaks down other living things to get nutrients). Human beings are consumers.

But what consumes the consumers? Assuming humans are at the top of the "food chain," the only thing that can consume us is ourselves. And this occurs as a direct result of unconsciousness--the lack of awareness (ignorance). This consumption is not just a physical one; it is also mental, emotional and spiritual.

This post will serve as the first in a series of three or four posts that philosophically observes the decline of Western Civilization, especially in America. Here are some initial points to provoke and prepare your and my thoughts:

Humans consume information but information consumes attention. The wealth of information that exists today equals a poverty of attention. The mind is the gateway to authenticity, productivity, spirituality and thus the mind is the enabler of the overall well-being of individuals. But without attention, the mind is not awake. Therefore the decline of attention translates into an increase in entropy--an increase in useless energy--and thus the figuritive light of the individuals that make up the society fades... and thus the society fades...

The term consumer is not just a scientific one. It is most commonly known today as an economic one that refers to the end users of products and services in economic and social systems. These consumers and their collective economic activity make up the vast majority of the economy, as measured by Gross Domestic Product (GDP). Therefore the vast majority of economic energy is spent keeping the consumers well-fed with food, money, and media messages to continue their growth and thus the growth of the economy. However, this effort translates into the interior deterioration of the economy itself over time, much like the body, mind and spirit of the consumers (individuals in society) deteriorates..

The increase in the capacity to connect people together has paradoxically divided the world into tiny cultural segments. Connectivity is diminishing into segmentation.

The increase in the availability and accessibility of luxury and convenience makes bodies and minds lazy. Therefore we grow physically overweight, mentally weak and spiritually dim.

When people grow accustomed to illusion, they require greater illusions to be satisfied. Therefore only a "better illusionist" will succeed in this environment. This partially explains why politicians have evolved to be more magician and less leader in recent decades.

The need to be
satisfied cannot be fulfilled if the appetite for satisfaction can grow
without limit. Consumption increases the appetite and thus there is no means of "satisfaction" in absence of consciousness.

These are just some of the themes that will be addressed in this series of posts that I currently foresee as my next book project (the current one is near completion, which provides excuse for my light posting lately).

I hope you'll join the conversation as we work to awaken ourselves, our friends, our families, our nations and the world. This may sound a bit grandiose in nature but such is the nature of a "crisis in consciousness," as Jiddu Krishnamurti so aptly labeled the modern sickness of society.

March 07, 2013

"My life has been full of terrible misfortunes--most of which have never happened." ~ Michel de Montaigne

Having written in this blog for more than 6 years, I have the opportunity to look back and revisit what I had observed about the world during interesting times. One such time was 4 years ago, in March of 2009, when the stock market was at its lowest point following the Great Recession. Stock prices had fallen more than 50% from the high point set in October of 2007.

Today, those "losses" have been erased, as stocks now stand at new records on the Dow Jones Industrial Average, rewarding patient investors willing to look through the challenge.

To look back at posts published 4 years ago, I keyed "March 2009" into the handy search tool at the top-right of the TFP blog site. Here are some observations I was making at that time:

Either we are not students of recession history
or we are giving too much attention to media reports. If the media
weren't telling us "how bad things are," would we really perceive things
to be as bad as we do?...

If I can make my tiny contribution toward a brighter future, I will ask
anyone and everyone to stop watching, reading and listening to
mainstream media.

In essence, the greatest human fear is that of the unknown. We would prefer to see something ugly in plain view than to feel and see the nothingness of the dark--and often the picture painted by one's imagination is an extended and magnified version of whatever emotion one is currently experiencing.

For example, in "bad times," as we are experiencing now, one's imagination will likely fill the empty spaces of information (unknown) with extreme pessimism and horrific images. Similarly, in "good times," one's imagination will likely fill in any existing empty spaces with over-confidence and positive images.

While there
is nothing inherently wrong with using the past to make certain
assumptions about the future, financial plans become increasingly
illusory when these assumptions are made in the presence of extreme
emotion...

We can not change the past so there is no use in complaining or
despairing over it; and much of our future success depends upon how we
learn from our past mistakes; therefore it makes perfect sense to
consider examples of faulty assumptions (illusions) made in the past that are colliding with reality now...

"All human situations have their inconveniences. We feel those of the present but neither see nor feel those of the future; and hence we often make troublesome changes without amendment, and frequently for the worse." ~ Benjamin Franklin

I summarize with a point: This exercise in reflection is not one of ego but rather one of humility. The presence of fear and panic in late 2008 and early 2009 was palpable and it certainly was not popular to say, "Things are not as bad as they seem."

Some of the greatest mistakes, both in finance and in life, are making faulty assumptions about the future based upon pattern recognition and emotion today: "If bad things are happening to me, there must be more bad things coming next." Equal and opposite, a string of fortunate events is no guarantee of more good things to come.

The greatest virtues in this regard are humility and contentment. When you realize that you do not know the future, and when you can be content with what you have now, you will not look into darkness and imagine either a treasure or a monster. In fact, you won't even look there because you have no desire to know; you reside in the light of the present.

June 06, 2012

The stock market has fallen more than 10% from its recent highs. By definition, this is considered a market correction.

As an investor and, more importantly, as a human being, the healthy perspective is to keep one's own negative sentiment in check--to separate oneself from the crowd--to focus more on the personal economy and less on the world economy--to remember that total well-being does not need to be completely dependent upon financial well-being.

You may need to correct the correction, if you will, in your mind.

From the financial perspective, it is important to reflect upon your own objectives for investments before forming any conclusions about market directions and especially before making hasty market timing moves. For example, if your investment time horizon is 10 years, you should expect to see a 5 to 20% decline in stock prices several times over the course of that time horizon.

"A straight oar looks bent in the water. What matters is not merely that we see things but how we see them." ~ Michel de Montaigne

Market corrections may be considered a healthy aspect of a larger bull market trend; ebs and flows are natural in the course of economic and market cycles. However, it is unlikely the investor herd will take this market over the cliff into a full-blown bear market trend, at least not quite yet.

According the Wall Street Journal, the most recent Price/Earnings Ratio of the S&P 500 is 14.98, with forward estimates at 12.55. In translation, stocks may be considered "fairly priced." Of course, prices can always go lower but bear markets most often begin at higher, over-priced levels.

"Worry is a thin stream of fear trickling through the mind. If encouraged, it cuts a channel into which all other thoughts are drained." ~ Arthur Somers Roche

Above all, the negative sentiment arising from distressed world economies and capital market declines need not be an eroding factor of your total well-being. Money that is invested in securities, such as stocks, bonds and mutual funds, does not represent money needed for your livelihood in the present; it represents future financial security; it does not exist to support the basic physiological needs of food, shelter and clothing; and once those needs are met, there is no good reason for temporary financial setbacks to erode at other areas of well-being, such as emotional and spiritual.

In summary, worry over your finances can paradoxically harm your finances but it can also harm all other areas of your life. When we experience financial market corrections, for the sake of your total well-being, it is important to go on living your life and to allow nature to take its course. To end appropriately with Johann Wolfgang von Goethe: "Life is about life and not the result of life."

May 21, 2012

"The wise man knows that it is better to sit on the banks of a remote mountain stream than to be emperor of the whole world." ~ Zhuangzi

I never really placed much energy or thought into the "99% vs 1%" debate. I think my lack of interest may be because I do not sympathize with or support either side--from what little I know, it seems neither side represents me.

If the 99% and 1% make one entity, what would it be? If it's "Main Street" vs "Wall Street," what about those of us who reside or work at neither figurative address?

I don't think the 100% whole, if you will, represents 100% of the people. Instead I believe both sides combine to form one group that shares one common, self-defeating human flaw--they care too much about money, material wealth and social status.

The 99% are discontented and the 1% are greedy. From my perspective, there is no real distinction between discontent and greed--both share the same path and destination; they are each causation and correlation of the other.

If thou wilt make a man happy, add not unto his riches but take away from his desires." ~ Epicurus

Are you part of "The 0%"? Here are some of the principles and philosophies that may confirm you are a Zero Percenter:

To the 0%, the definition of wealth has little or nothing to do with money or materiality. To be financially rich is to have anything more than "enough."

Life is not a zero sum game; there can be more than one winner. If someone earns more in one minute than you earn in a lifetime, so what?

You won't identify yourself as part of "The 0%" because you don't care to be part of any defined organization. By virtue of not being 99% or 1%, you are 0%; there is no reason to announce to the world your alignment with any defined group.

You have no complaints against any particular party or entitity because you believe that "everything is exactly as it should be" and therefore the attempt to change others is no different than attempting to fight against nature--it is foolish and self-defeating.

There will never be any protests or public display of anger by The 0% because it goes against their contented nature. Making matters worse, protesting will only attract pretentious people looking to find some reason to protest!

You prefer to be nobody because trying to be somebody is an act of ego.

You know little of the 99% or the 1% because you--The 0%--are too busy enjoying life to read, watch or listen to the noise of mainstream media or annoying people around you trying to align with either side.

Perhaps I should start an organization called "The 0%:"

I could create a fancy logo and slogan; the 99% will join the organization, buy my merchandise, read my messages on my blog, website, Facebook page and Twitter account and thus propel the entity to become large enough that the 1% will sell it to the world with an Initial Public Offering; the 99% will buy more merchandise and shares of stock, the 1% will gain more financial wealth; the 99% will complain about the fortunes of the 1% (but continue to consume the 1% group's newly developed version of The 0% product); and the world will find which side to share sympathy so they may publicly communicate their ego-driven ideals and dogma through other products (i.e. Facebook, iPhone, etc) that are all owned by the 1%.

May 16, 2012

"Everything can be taken from a man or a woman but one thing: the last of human freedoms to choose one's attitude in any given set of circumstances, to choose one's own way." ~ Viktor Frankl

Complaining about the economy, followed by blaming a politician, makes one weaker and less free by unwittingly handing over more power to politicians.

The question, "Are you better off than you were four years ago?" implies that some other human being on the earth, the political leader of a nation, can decide your financial well-being or, even worse and adding insult to injury, that someone other than yourself can be the provider of your total well-being.

Equally, praising a politician for financial fortune undercuts your own ability to grow. The praise implies you are not the master of your own fate. You have imprisoned yourself; you have shackled yourself in chains and handed the keys to someone else; and then you blame them for not giving you back the keys.

"How unreasonable people are! They never use the freedoms they have but demand those they do not have; they have freedom of thought—they demand freedom of speech." ~ Soren Kierkegaard

To be honest, I once used the excuse, "The recession made XYZ more difficult" or equal and opposite, "XYZ was better before the recession." Notice that I use the word excuse, which is just what it is--an excuse.

Yes, economic conditions on a large scale do have far reaching impact. But why hold yourself (and your friends, family and the entire nation) down by looking to politicians for salvation? As a whole, they are a class of human beneath us all. They are fully aware of human weakness--the desire to be told what to do, to be inspired, to look to them as the enablers of dreams--and they exploit the weakness for their own purposes.

"The resistance to the unpleasant situation is the root of suffering." ~ Ram Dass

In difficult economic times, the submission to suffering, rather than recognizing it as a natural process--no different than the ebs and flows of the ocean--by refusing to embrace the transience. You thus defeat yourself and perpetuate the very condition you complain about while attempting to overcome the rip current by swimming against it.

This is not to say that the conditions of recession are not difficult. When you are running at full speed and stumble over a bump in the road, there is no question that the bump was there, only you did not see it coming, and perhaps you were injured. Your choice at that moment is to lay there or to get up, even if you are unable to run at first.

Recessions do exist but only you make them real; only you allow them to persist; participation in recession is voluntary; and your economic well-being, even that of a nation, is not something that can be created or destroyed by the will of those in political power.

"You must be the change you wish to see in the world." ~ Mahatma Gandhi

The real influences of a nation's economy--the entrepreneurs, the innovators, the hands-on parents, the coaches, the teachers, the artists, the individuals--you--succeed not because of political policy but in spite of it--one succeeds when one recognizes that the true source of power lies within oneself, and that there are no failures--there are only opportunities for growth.

March 27, 2012

One is ignored, two is a fluke, three is a pattern. Once the pattern is recognized, it is drawn into reality. Stock investors are wise to pay attention to this human (and flawed) heuristic attraction.

Having been through the typical and dramatic post bear market bounce (2009-2010), followed by a correction and slowing volatility (2010-2011), it seems all that remains is the third leg (2012-?) where speculators and amateurs drive stock prices higher only because "everything is going up." By the way, there is no fourth leg...

Intuitively, I had already anticipated that the third and final leg in this bull market for stocks will begin this year. I haven't been seeking to confirm these intuitive thoughts but I recently stumbled over this simple and illustrative MarketWatch article, Three stages of a bull market. I'm not a technical trader but I believe charts, such as those presented in the article, can be more telling of human behavior (and eventuality) than that of fundamental analysis.

I also like to consider intuitive thoughts and anecdotal evidence. Here's an example I use with clients:

It was late 2005 and the sweet little old lady down the street greeted my wife and me as we were walking our dog. She asked, "Are you going to buy one of those new condos? People are buying them and selling them for quick profit."

At the time, this trend of buying and quickly selling for profit was called "flipping." My wife asked if we should try flipping a property. My response was this: "When the little old lady down the street is doing it, the time to invest has passed."

Back to the present, the sweet little old lady no longer lives down the street but it is clear to me that there are more speculators and amatuers wading back into the waters of risk now than at any time since 2009. I have recently spoken to prospective clients who were "not ready" to invest in stocks in 2009 but are now more comfortable with risk. This is purely anecdotal but it is reflective of third-leg behavior and a caution: Investors are presented with a double-edged sword where stocks may move significantly higher but volatility and an eventual onset of the next bear market is coming closer.

January 19, 2012

"A foolish consistency is the hobgoblin of little minds, adored by little statesmen and philosophers and divines. With consistency a great soul has simply nothing to do." ~ Ralph Waldo Emerson

This quote from Emerson comes from his essay, "Self-Reliance," which in the essay's title itself reveals the wisdom within the famous quote: Foolish consistency in this context is a kind of mindless state (habit) that supports herd behavior and group-think; it is conformity, it is mindlessness, it is inauthentic, it is ultimately self-defeating, and it is normal. But normal is not healthy...

The self-reliant person is not necessarily someone who resists crowds or abhors outsourcing certain tasks to others--an island unto oneself, if you will--but rather a person who does not fall into sheepish behavior.

Here are a few general examples of 'foolish consistency' for context:

Continuing a certain behavior because "that's the way it's always been done."

Following the paved road of conventional wisdom for fear of following (and possibly failing in) your own path.

Choosing a career path that pays well with little or no consideration for how the career aligns with your personal priorities, passions and skills.

Failing to look at ideas from a different perspective because they don't match your pre-conceived (and possibly distorted) views of the world.

As author Richard Brodie says in his recent top-selling book, Virus of the Mind, "the hobgoblin of little minds" is "what keeps people from making the most of their lives." In different words, the hobgoblin is an absence of mind--an absence of self, an absence of consciousness.

To defeat the 'hobgoblin of little minds' one must be aware of their tendency to fall into the lazy and mindless habit of conforming to conventional thought and behavior. For most people it is a matter of deconstructing and unlearning what you've learned.

This can be done by reflecting upon your daily activities and by discovering which ideas, thoughts and behaviors are not your own -- it is deprogramming and reprogramming your mind. Why do I continue to hold this losing stock? Why have I always voted for the same political party? Am I trying to please others and never pleasing myself? If I were born in a different country or to a different family or in a different time, would I think and feel the same about things? Is there more than one side of the truth -- more than one perspective?

December 05, 2011

As a child, I would roll down the window in our family car while travelling on the highway and put my hand a few inches outside until I felt the pressure placed upon it from the strong and rushing wind. The force was enough to push my arm to the back of the window.

However, if I placed my hand flat and parallel to the ground, it would slice through the air like a hot knife through butter. If I angled my hand by tilting it slightly upward, my hand would lift up much like I imagined a bird would fly. The opposite was true: I could angle my hand down and the wind would push it down.

That was an early lesson in angles.

"Thus what we gain is Something, yet it is by virtue of Nothing that this can be put to use." ~ Lau Tzu

Today, if I think my young children are in a listening mood, I'll pass along to them this lesson that combines physical science and Taoism:

Resistance is the root of all suffering; non-resistance is the root of contentment.

The rigid tree breaks in the strong wind; the reed bends.

Swimming against a rip tide is a cause of drowning; swimming with the rip current will save your life.

The forceful and outspoken attract adversity; the mild and reserved remain at peace.

These yins and yangs do not need to be either/or; they can be balanced and comined or they can be altered slightly. This lesson takes little imagination to apply to our every day lives:

Investing passively (not trying to time the stock market) most often produces the best results but a well-chosen and slight angle can produce greater results.

Going with the crowd can be advantageous but a slight deviation from it can be better for the individual.

The human eye prefers right and complimentary angles--it seeks patterns--but an obtuse or odd angle can be much more interesting and attracting.

In music, the notes of a scale work together to create melodies or harmonious chords but bend a note just the right way or strike a dissonant chord and you can communicate an entirely different and powerful emotion.

The flat hand slices through the air, but a slight angle can make it fly. Conversely the wrong angle will make the hand turn down dramatically. In other words, non-resistance can be good; but just the right amount of resistance--the right angle--the right perspective--can be better if you can find it.

"The little reed, bending to the force of the wind, soon stood upright again when the storm had passed over." ~ Aesop

One only needs to learn when to resist (or bend) and by how much. I've found many advantageous angles in life but when I find one that doesn't work I can always return to the flat hand of non-resistance.

August 18, 2011

How often have you accurately predicted your reaction to emotion-provoking events in your life?

When the stock market gets volatile as it has been in recent weeks, I am reminded of the irrelevence of risk tolerance questionnaires. If you've ever sat down with an investment advisor or financial planner, you've likely seen or heard the questions that try to predict how you might react in various stock market scenarios.

For example:

"If your investment portfolio were to fall by 20% in the course of one year, how would you react? Would you A) Do nothing, B) Wait a few months to make a decision, or C) Sell your stocks immediately?"

After answering about 20 questions like this, the advisor or planner then assesses your risk tolerance and will likely label you as one of three investor types--aggressive, moderate or conservative.

"A man’s knowledge is like an expanding sphere, the surface corresponding to the boundary between the known and the unknown. As the sphere grows, so does its surface; the more a man learns, the more he realizes he doesn’t know. Hence, the most ignorant man thinks he knows it all." ~ L. Sprague de Camp

The problem I have with these questionnaires is that no human being can consistently or accurately predict their own behavior, especially if they've never experienced the scenarios given on the questionnaire. I have several clients who had once thought they were "aggressive" investors--able to tolerate high risk, high volatility--but were ready to bail out of stocks immediately after a 5 or 10% decline. This is not poor judgment on their part--it is simply human.

Consider life scenarios. If your spouse died, how would you react? If you lost an arm, what would you do? If you survived a terrible car crash, what emotions would you be feeling just moments after it occured? The honest answer is "I don't know."

"Fantasy may call the grapes of reality sour, but those who have tasted them know at last a dependable delight." ~ Dorothea Brande

Predicting behavior is at the root of most failure. For example, something that seems difficult to endure is often not as terrible as you might imagine; but because you hesitate or fail to make an attempt at accomplishing a goal, you fail. Conversely, you may imagine something causing extreme happiness so you pursue it. However, if and when the thing is obtained, the happiness fades quickly or doesn't happen as you had once imagined.

Humans underestimate their ability to endure difficult times and they overestimate the happiness they will feel. Therefore the seemingly difficult goals might never be attempted and the pursuit of happiness can be misleading. The most accurate prediction, with regard to your future behavior, is that your prediction won't be accurate. Embrace transcience; be content with the way things are now; be satisfied with not knowing the future or attempting to control it; and allow your imagination to be your friend, not your enemy.

Disclaimer

The information on this site is provided for discussion purposes only, and should not be misconstrued as investment advice. Under no circumstances does this information represent a recommendation to buy or sell securities.